Interim rent is the rent payable by a commercial tenant in England & Wales whose tenancy continues by virtue of statute; and is distinct from contractual rent payable under the lease. Time begins to run for payment of interim rent following either service of a notice pursuant to section 25 or request pursuant to section 26, under the Landlord and Tenant Act 1954 ("1954 Act").
Different methodologies to determine the level of interim rent are adopted, depending upon the circumstances of the matter. Where the landlord does not oppose its tenant's request for a new tenancy, interim rent is likely to be the rent payable under a new lease as determined under the 1954 Act (section 34) – being 'open market' rent.
Where an existing lease is on a rent based on a percentage of the tenant’s turnover, establishing what the precise sum is in respect of interim rent has proven to be a difficult, if not impossible, task, because turnover is by its nature (even outside of pandemic-times), variable.
Interim rent as turnover rent only in exceptional circumstances
In the recent case of W (No.3) GP (Nominee A) Limited v JD Sports Fashion plc, this issue was considered. Here, the landlord had sought turnover rent for both the new lease and interim rent, and the tenant sought fixed rents.
The court ordered a fixed rent in both circumstances and held that it would only be appropriate to determine a turnover rent in exceptional circumstances, where it was common in the relevant industry to determine rent using turnover as a basis.
The court also held that the whole of a rent-free period must be devalued on a comparable property, with no distinction to be made between a fitting-out period and an incentive rent-free period.
If you have any concerns or questions about rents due under a 1954 Act lease renewal and how these claims may impact you or your business, please do not hesitate to get in touch with our real estate disputes team or your usual Brodies' contact.
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